Question 2: Budgets

Space Ltd makes and sells a single packing product.Annual sales in units for 2021 are expected to be 210,000, and standard cost and selling price per unit is:

Selling price30

Variable costs:

Materials8

Labour8

Overheads2

Annual fixed overheads for 2021 are budgeted at:

Manufacturing:528,000

Non-manufacturing 336,000

Actual production and sales for the first quarter was 48,000 units. The actual revenue and expenditure for the quarter was as follows:

Sales revenue1,506,000

Expenditure:

Materials355,500

Labour376,500

Variable overhead97,200

Fixed overheads

Manufacturing120,000

Non-manufacturing105,000

Space Ltd divides the annual budget by 4 in order to produce quarterly variance analysis reports.

Required:

a)Prepare the first quarter variance analysis report showing the fixed budget, flexible budget and flexible budget variances.